YC W13 Will Be Smaller
ycombinator.com
ycombinator.com
Maybe it had less to do with magnitude than direction.
I look forward to reading about yc start-ups, but increasingly find myself shaking my head, wondering how some of them will ever amount to sustainable businesses. I've always attributed this to the fact that yc must know a whole lot more than me.
But pg's recent disclosure that so many yc start-ups have co-founder issues really got me wondering. I find it unimaginable that any team can work itself into such a good position and then blow it away over seemingly petty issues. Is it possible that some trend other than scale is at work here?
I was at the first startup school (in Cambridge) and I remember thinking that about reddit whereas the one I thought most promising (click fraud detection) seems to have flopped.
Other than making a bet on the people, I wonder if YC also has no idea about which startups will succeed.
It's an amazing edifice of the Internet, but it is not profitable.
When you're on the outside looking at a team, it must seem as if the members share a purposeful determination. And they often do. But just as often, the startup effort simply becomes a new norm, inhabited by human personalities, inclined towards squabbling just like dorm roommates.
Membership in a startup team can amplify drama as much as suppress it. It fuels personal squabbles with a sense of import. The best way to resolve the overwhelming majority of conflicts is to walk away and let them cool down naturally. But in a startup, it's easy to tell yourself "we have to resolve this problem right now; the fate of the company is at stake!"
It's also probably the case that a lot of long-term simmering "important" issues actually started out as manageable problems that could have been dealt with, but for poor conflict handling early on; either the issue is broached and turns into a scalding fight, or fear of that fight keeps the team from addressing it early enough.
You would think this would mean founders with stable marriages would have an advantage. :)
I bet stable founders have more stable relationships with their SO's.
Dave Ramsey writes about how his company uses dinners with spouses as a part of their interview process. They won't hire anyone "married to crazy". They also fire anyone who cheats on their spouse. I found his book quite misogynistic and offensive (not to mention having the worst title ever), but I wonder if he's onto something.
The idea of YC (or any company) using personal relationships as part of their filtering process makes me extremely uncomfortable, but it's interesting to think about.
The point is to assess the person's "people skills." I think "people skills" or in general "emotional maturity" is by far the most important factor in someone you need to work with on an intense level. Be that co-founder, SO etc.
And this was entirely in the context of a startup.
* That you were serious enough about the candidate to take them and their spouse to dinner; in other words, that you were probably inclined to hire them.
* That it is possible that the dinner, which only could have been an issue for candidates with spouses, had something to do with the decision not to hire.
Investment decisions are very different from employment decisions. You can probably discriminate against investment opportunities for any reason whatsoever, including race or religion. But dinners with spouses as part of an interview process seems like a great way to get sued repeatedly.
After the call I told him that was illegal here and he can't ask that question in an interview. He was shocked. He said Indian women are expected to devote time to their families once they are married. Single women have much more time to devote to the project and would be much better for our team.
I've known that women have been discriminated in this way for a long time, but I had never encountered it personally until then.
It's a little like suggesting that you're not filtering based on religion if you ban yarmulkes.
pg wrote about this -- the best startups seem like bad ideas but are good ideas. They seem lame. I don't think there is any way for you to judge a startup by "reading about" it. You haven't met the founders, etc.
Given that a lot of YC seems to come from PG's own experience, which involved selling Viaweb to Yahoo, I'm not sure "long term sustainable business" is necessarily what these guys are going to shoot for. And I think that's ok too: some people are just cut out for taking a business from 0 to 80, but not managing it long term.
Thats like saying, given that Apple experience comes from building the first computer they must not know anything about mobile.
YC experience comes from doing YC itself.
Seriously folks, this is some dumb, dumb stuff. Even the senator who gave the infamous "tubes" speech probably knew that the Apple didn't invent computers.
No, but I really got the impression as YC grew over the years, from what was reported of it, that PG modeled it, at least initially, after his own experience. Doubtless it has changed over time as they've learned.
My point was merely that there is not necessarily a "build a company to last years" in the group's "DNA".
The Viaweb crew took an exit - a good exit, in my opinion - but their business model was sound, profitable, and strong.
Seems that way to me too. But they opted for an exit, rather than deciding to work at it long term.
I think the world is better off with YCombinator, rather than some evolved form of Viaweb, myself, but the point was merely that for them, not doing something "long term" is not a failure.
If YC wants to continue to grow (financially), it could possibly:
1. Diversify - Perhaps start a pure VC wing
2. Segregate - Provide specific expertise in verticals (travel, hospitality, sports, etc), horizontals (like consumer web, mobile, etc), or regions (emerging markets, global markets, etc)
That being said, I can't help but think that YC employees probably struggle to understand it's ultimate financial growth strategy while at the same time realizing that in it's current state it's already an extremely valuable business and provides those involved with loads of continuous personal satisfaction both financially and psychologically. So while it may sound like I'm discrediting the organization, I'm dually jealous of the "good problems" they have.
In other words, with VC backed companies, the thing these companies are making isn't really the product in many cases is it? It's the companies themselves. Just like a gear isn't really much, but add some springs, and a few other odds and ends and you have a watch that people will buy. But it takes a bigger picture visionary to figure out that the company that makes gears and the company that makes springs should be both acquired to make that watch company. Till then, they have to try and find their way by either spending their investment dollars till they can find that visionary, or find a market supplying micro-miniature gears to other watch making companies.
The founders and investors are rewarded for taking the high risk of finding out that there is a market for micro-miniature gears after the acquisition. But until then everybody wonders why one would want to get into gear making in the first place?
YC is basically in the meta-business business.
Paul Graham's recent essays on growth and startup ideas reflect a much deeper and more nuanced insight into the startup process than you give him credit.
And companies don't found themselves to be easy to break up, for the same reasons people don't set up prenups on marriages.
(If anyone is wondering why we don't just reject all the startups with crazy sounding ideas, Airbnb was one of them.)
Retrospective analysis biases "initial" perceptions post-facto.
But there were many people who thought this kind of thing could be huge, and plus the non-profit Couch Surfing was pretty big at that point if I'm not mistaken.
IMO, if you can talk about these features/predictors, they are true predictors. Otherwise, if people can game the system if they knew these features, I'd think they're more artifacts about your current process than attributes of failing startups (and if it turns out that these features are actually causative of failure, rather than just predictive, everyone can be a better startup too).
To me, it's clear that the quality of the average YC company has gone up.
Can you share the details of what broke and how?
Even if you won't share your strategies for detecting & fixing the bottlenecks, I'd love some background on what they are.
My guess would be that it's the number of "companies in simultaneous crisis" that grew beyond control. I used to warn new managers that somewhere just above 8 employees is the point where you always have one that is going through a serious illness in the family, divorce, addiction to drugs/video games, or something else that will take up all of your attention (if you let it).
Extrapolating to companies, I'd bet that the senior YC staff can handle, say, 5 companies in crisis (e.g., "co-founder issues") but growing to 10 was just too much and things started falling through the cracks. Or became unfun, since when you're handling crises you're ignoring the stars, which is a very common new manager mistake.
And unfortunately you can't scale the VCs to handle more crises; you either need more time from senior YC-crew or you have to find the equivalent of a human resources department to handle those issues and just stop trying to fix them yourself.
Why are you calling them petty?
Do you find divorce similarly unimaginable? Most co-founders know each other less well than most newlyweds and spend way more time together.
People going into YC with obvious dysfunctions aren't going to get a "yes". The remaining groups are those that:
a) are good at managing stress and disagreement - so don't show any
b) haven't yet had a major stresses that will cause problems - so don't show any
Since dealing well with stress and disagreement is a learned skill I would imagine that YC's focus on younger founders may make the (a) group fairly small.
Getting accepted into YC immediately puts companies into a stressful situation (moving, spending 24/7 on startup, the "this is our chance to make it" vibe, etc.) - so folk in (b) who haven't had to figure out how to deal with disagreement well are going to have problems.
Pg, can you elaborate on this a bit?
To grow bigger we have to (a) make it easier for each partner to know what each startup is doing, or (b) make it unnecessary. The answer will probably be a bit of both.
The symptom was not startups having trouble raising money (that seems to be working about like it usually does) but us partners always feeling confused. We were not ahead of the aircraft in the way we'd been in the past.
http://techcrunch.com/2012/11/20/startup-genome-ranks-the-wo...
This would definitely make for interesting reading if/when you choose to share details.
Also, it sounds like at least part of the Y Combinator size issue is a version of Dunbar's Number, applied to business rather than social relationships.
Including the Ns would be even more overwhelmingly valuable. I.e. I can calculate a Bayesian likelihood ratio and get some idea of the confidence from e.g.:
* Founder has green hair: Successes 10/80 Failures 40/122
However I would much rather have the brief bullet-point list than not have the bullet point list with lovely numbers attached.
Implying that there are secret rules to "a game" make it a highly attractive subject to try to discover these.
From the about page: > All venture investors supply some combination of money and help. In our case the money is by far the smaller component. In fact, many of the startups we fund don't need the money.
This is intriguing, because investor as I imagine would like to spread there bets as much as possible.
From an investors point of view, isn't it counter intuitive to solidify around a smaller number of start ups.
Although, I agree that they should invest more time, as a path to success. Showing care for your investments seems all around wise.
Just food for thought, I'm not sure if I have a point most of us don't already realize.
what am i missing? am i just being too literal, or have you identified some real process that is O(n^2) per person, or is the total cost more important than i think? or am i just being dumb?
or maybe even handling O(n) per partner is too much. i guess that may be all it is. my initial reading was that O(n^2) explained why 66 and 84 were so different (when linearly, they're pretty similar).
In this case, it's not homogeneous; there are n startups and m partners, but if every partner needs to know what's going on with every startup, you still have O(mn) communication channels. If, for example, you assigned n/m startups to each partner, the total communication channels needed would reduce to O(m+n). I believe pg is referring to something along those lines when he says he'd like to make it unnecessary for each partner to know what each startup is doing.
I might be misunderstanding your "ahead of the aircraft" statement, but personally, I think it's unreasonable for you to expect YC partners to be "ahead" of the startups in a batch. In fact, if YC partners are not behind in understanding a startup, then that startup is in trouble. The startups may not have the benefit of experience possessed by the YC partners, the startup founders should always know the state of their own business and market better than the YC partners do.
I believe one of the reasons why you regularly advocate being concise is due to your own personal overload problems as well as the stated problem of all YC partners not keeping up with all of all of the issues in all of the startups in a given batch. It's the classic many-to-many communication problem where the ability of partners to assist and advise startups is limited by their ability to stay informed.
Even if you're never able to isolate every single metric a YC partner should know, identifying as many of these metrics as possible and having a reporting mechanism would still reduce the load on YC partners. Though its not publicly known, I'd bet you do already do something along these lines, either formally or informally. Your "growth.html" essay seems to hint in this direction. None the less, making improvements to your identification, collection, and reporting of useful metrics should still be a worthwhile investment.
I sincerely doubt you would want my help implementing a startup metric collection and communication system, but I'll offer to help anyhow. It's a fascinating problem and it seems like a really fun challenge.
You could be running up against Dunbar's number (http://en.wikipedia.org/wiki/Dunbars_number) for the more social (as opposed to purely technical) aspects of what is going on at each startup. 66 startups with an average of a little more than 2 people per startup is hitting the upper limit (150) of what the human brain can handle socially. 84 startups with the same average exceeds it.
In my own experience, once a company or social grouping exceeds 50 to 150 people (the more tightly bound the social group, the lower the count), things change noticeably, so I'll be watching with interest what YC does to get around this.
Actually, I think you have always published many of the predictors of failure. http://www.paulgraham.com/startupmistakes.html seems like a good start, but there are probably more specific indicators during an interview or during 3 months before Demo Day.
The ones which seem most relevant are all variants "not making something people want" -- either not making something effectively at all, or that which you make is a bad idea/market, or making something which is a good idea but crap implementation. Obviously several potential causes of each.
From what PG seems to be saying, it's more of an organizational problem, and I'll take him at his word. However, I just feel like I've seen a lot of (admittedly impressive) people applying to YC because they see it as the path to easy VC funding and lots of press only. And maybe a resume booster. I can see the effects of that being that it becomes harder to identify who is earnest and who is not, especially with such impressive people throwing themselves into the pool.
Either way, I think it's nothing but a positive to see YC continuing to innovate and tweak.
If you want to make important changes that could affect a startup's interest in accepting YC (financial terms) or make it much harder to get in (even at the interview stage) than it has been in the past you have a duty to do so before you hook hundreds of entrepreneurs into committing to sit with you for 10 minutes.
It was a good experience to prepare for and attend YC's interviews. However, it took valuable time away from the most important people in our company, both from a preparation standpoint and a distraction from execution.
Our company is based on the west coast, and the $800 in travel reimbursement did not cover our costs to attend (we went ~$200 over and were very lean. You upped the criteria, lowered the reward and didn't completely cover the cost to try out. Small dollars and a few days matter a lot to a company at our stage.
It is one thing to tweak your program and make it harder to get in. It is another to do so in secret or after you've gotten entrepreneurs' hopes, dollars and time committed to trying.
I hung out at the YC office before and after our interview, and the environment is not like you project: http://static.picwing.com/18075/e_106219_t540.jpg It is actually pretty ruthless, and I picked up a sense of realized power and eliteness.
As an example, YC put a really nice selection of organic-looking food right next to entrepreneur registration table. This food was not for the entrepreneurs, yet it was on full display. I approached this food by accident and was actually told by a YC staff member (in a tone that suggested a silly mistake) that there were "bits and scraps" available on the other table for us.
That is kind of what it felt like in this process. A bounty of food that is kept within sight, but actually quietly kept quite far out of reach. It ended up feeling not that much different from pitching a traditional VC.
- they are actually giving a heads up on how most of people will treat you or;
- there are just too many interviews and no time to make anyone fell comfortable.
Edit ====
Anyways, I remember in 2006 when I barely could speak english and was doing a master degree in the US. I needed to find a part time job to help me pay for unexpected expenses.
There was an interview at an investment firm: I felt like I was worth less than nothing. I almost cried after leaving the building. Anyways, 20 minutes after I left they called me and offered a position.
When we feel vulnerable anything people say to us we tend take it the wrong way or overreact.
Good luck with your venture.
Morning food situation was also awkward as you mentioned.
Everything from lean manufacturing to project management has come out in favour of the small batch size, maybe the thing to do is to work out how to split the existing large batches into many smaller batches.
This might also help increase your learning as you would have a much tighter feedback loop.
Congratulations to those of you that were accepted into W13. It looks like W13 was the most difficult to get into yet.
If you look at each class and say, "Well, last year we had 5 breakouts out of 50. Why not increase that denominator to change the numerator?"
Unfortunately when you do this too quickly, the numerator doesn't change. It stays the same or sometimes even decreases (in my example, holds at 5).
Staying focused while growing is a very difficult thing to do.
As an aside, funding to the point of creating financial carcasses in the previous cycle could have effectively lowered the Dunbar number for that batch.
(insider)
It might sound trivial, but it is probably a good indicator of impulse control, attitude, and cleverness.
Perhaps the answer is quality, due to a overshoot of no of companies funded, the quality went down, and then it hit you guys, that 'hey! the last of many haven't been any AirBnB or Reddit' so its better to slow down a bit, and let the levels go up again on it.
"Excessive fishing in a lake can be best balanced by under fishing" that is what this looks like to me.
Maybe at 84 startups the total number of founders went above 150?
Going to be interesting to see what happens, especially due to Y-Combinator being rather a unique case in this regard.
Having a lot of startups in every batch reduces the focus of YC partners In these situations, even startups with a very good potential (like Airbnb & Dropbox) won't be able to achieve much.
YC can increase the number of partners, advisors, mentors or cycles per year (instead of diluting their time over a lot of startups).
If you're successful you'll be working for far longer than that. Even if you're not successful good teams will continue to iterate or change ideas, which will often take far longer than 24 months.